Spotlight on Marine Fuel Issues An overview Sophia Themelarou Lloyd’s Register, Fuel Oil Bunker Analysis and Advisory Service (FOBAS) ELINA PROJECT – 5th FORUM, APRIL 25TH 2014

Overview 1. Fuel quality 2. Future development Marine fuel grades Practice of blending Sludge generation 1. Fuel quality Regulatory framework Shipping industry response 2. Future development

PART 1 Fuel Quality

Introduction Bunker fuel is NOT a uniform product or product stream in itself Various streams of heavy residues and lighter cutter stocks are used to make the final blend Product in bunker tanks on board the ship is the result of optimization between production costs and compliance with specifications Composition of fuel delivered to ships has changed over the last few decades Rising costs and fluctuations in feedstock quality as well as optimized refining techniques make fuels more complex in nature

Marine Fuel Oils Residual fuel oils Blended from: Atmospheric residues Vacuum residues Visbroken residue Process residues+ distillate Distillates Blends usually for DMB/ DMC grades only - FAME? Grades (ISO 8217:2010): RMA10, RMB30, RMD80 RME180 RMG180, RMG380, RMG500 RMG700, RMK380, RMK500, RMK700 Grades (ISO 8217:2010): DMX, DMA, DMZ and DMB

Changing Landscape of Blending Increasing demand for LSFO products High crude prices Increasing demand for light distillate products e.g. gasoline and diesel More resources dedicated to sophisticated refinery processes that enable high yield fractions Residue and lighter cutter stocks changing

Main target blend specification Producing an acceptable fuel: Viscosity (initially) - Reflected in product names and classification (relates to ship’s ability to effectively pre-heat fuel prior to consumption) Superseded by density as refining techniques became more sophisticated Remaining parameters include limits specified in ISO 8217 Blending is now mostly about producing an acceptable fuel whilst meeting sulphur requirements. Impact of environmental regulations Increasing demand for LSFO products Superseded by density as refining techniques became more sophisticated.

From Fuel Compatibility to Stability Unit sheets Asphaltene stacks Start of agglomerate formation Asphaltene deposits

Two-Component Model (Shell, 1952) Fuel oil system consists of two pseudo components: Asphaltenes : largest, most polar molecules with a tendency to form a separate phase Assigned value: FR max (insolubility number) Maltenes : the rest of the solution which acts as a solvent for the asphaltenes Assigned value: Po (solubility number)  Fuel is stable as long as Po > FR max (or Po/FR max >1)

Fuel Quality Key Issues

Is sludge generation a problem? 26% of the total investigation cases of FOBAS (2013) were sludge/ filter clogging based

PART 2 Future development

Emissions regulations drivers SOX NOX CO2 Particulate Matter

Marine Exhaust Emission Controls IMO MARPOL Annex VI Adopted by MARPOL Conference in 1997 – in effect from May 2005 Substantially revised 2008 – in effect from July 2010 Currently 75 signatory States Revisions and interpretations resulting from IMO Marine Environment Protection Committee meetings – latest April 2014 National / Local Controls EU Sulphur Directive – 0.10% m/m S cap for vessels ‘at berth’ within EU ports Regulated California Waters -DMA or DMB 0.1% m/m S for 24 nm off the coast of California Other national / local regulations or ‘voluntary’ schemes

Sulphur Emissions Regulatory Framework

Current Emission Control Areas (ECA-SOx)

Reducing Emissions ~ The Refineries Perspective Will deliver distillate demand with current production methods Up to 2015 <0.10% S – Coking refinery techniques for more distillates: not a cheap option 2015 and after Predicted to be more costly than HSFO but less than MGO 2020/25 S<0.50% m/m Currently shipping is a wide residual fuel market - low value by product- but significant investment required to deliver <0.50 & <0.10% S fuel – 2015/20 Will abatement technologies or Alt – fuels ease demand on refineries? Will emissions technology evolve resulting in more stranded refinery investment risk?

Alternative Fuels? Petroleum (today) 2. Alternatives (Next 10 years) Residual Marine fuel oils (RFO) Distillate Marine fuel oils (MGO) 2. Alternatives (Next 10 years) LNG, RFO/MDO + EGCS LPG / CNG / Hydrogen Methanol /DME Bio-Diesel FAME HFO Emulsions MSAR 3.Alternatives (5-30 years) Bio-Fuels /Gas – 2nd / 3rd Generation Synthetics Coal Glycerol Wood Chip Nuclear 4.Natural energy sources (hybrids+) wind solar Wave Any Others ?